Happy Thursday, fellow traders. I don't know if you've heard it yet, but you will soon enough... JC Penney (JCP) posted last quarter's earnings after the close today. They were good. Net income improved by 71%, same-store sales were up 6.0%, and revenue was up 5.2%. EBITDA turned positive, and though the retailer still booked a loss, there's no doubt the second quarter was a real reason for hope. The proverbial "so what" is, this speaks volumes about the current state of retail stocks, and at least to some degree speaks about the strength of the consumer right now. I don't think we've mentioned this yet, but John Monroe over at the Elite Opportunity service has been keeping close tabs on the retail sector and its stocks of late, accurately pointing out this once-red-hot group has just been dead in the water since October of last year. It matters, as retailing is a barometer of consumer spending, which is an indicator of consumer confidence. Said more directly, retailing is a clue about the economy's strength, and if the sector's stocks stall or stumble, the infection could spread quickly to other areas. As John explained it in today's EO newsletter: "... it's also important I point out many companies making up the performance of this particular sector are consumer discretionary. Meaning, stuff we want, not just stuff we need. I point this out because when consumers are spending not only on stuff they need but stuff they want, it's often a good sign of things to come for stocks in general. Conversely, when consumers start tightening their wallets, it's often not a good sign of things to come and so far this year, consumers just don't seem to be opening up their wallets, not yet anyway.... ...Over the last several months, however, the sector has continued to struggle, suggesting it's either in a bit of a bullish consolidation phase or it's in the early process of rolling over. If for some reason the sector can start to perform and more importantly, finally find its way to [key levels] which it failed to do so on three previous occasions, it would likely become the single biggest catalyst for stocks for the rest of the year. Conversely, if it starts to lead the markets to the downside and picks up steam, that's not going to be a good sign." So what's this got to do with JC Penney? The once-struggling retailer may have just breathed new life into the sector. We'll just have to see. I think the odds are good this could be a real spark for the industry though. If Penneys can make something out of nothing, then surely most other retailers can do reasonably well too. Anyway, I just wanted to plant a bigger-picture seed for a later discussion. Maybe we can borrow some more of John's thoughts in the near future. Now, while Penneys may spur all of its peers higher from here, even if it doesn't, if there was ever a turnaround story itching to positively impact a stock, it's JCP. To give credit where it's due, it was Bryan Murphy who first laid out the possibilities for a rally from JC Penney shares when he looked at the chart and the company back on the 8th. I'm going to build on his assessment though, since the company's earnings news gave me a big building block to work with. Simply put, the strong results spurred about a 9% gain from JCP in after-hours trading on Thursday. Assuming at least some of this strength holds through Friday morning's opening bell, the stock HAS punched through a key resistance line that was part of a converging wedge pattern. Take a look. This all has huge implications for the stock. The dashed black line shows you where the ceiling has been since the stock reversed for the better earlier in the year and left a trail of higher lows. The red dashed line shows you where JCP shares were trading in the after-hours session. I have to wonder if the peak around $10.24 in late 2013 is the reason the stock was capped there in Thursday's after-hours trading, but I don't think it is. And, even if it is the reason, the hard work has been done - the ceiling at $9.75 has been hurdled. We were seriously considering adding JC Penney to the portfolio. We probably will still do so, too, but I don't like trading something in the midst of volatility and emotion. Once the dust settles we'll make the decision. If we do make the decision to step into JCP though, know that it will be for a combination of long-term fundamental as well as technical reasons. There's more to be hopeful about the company with today's results than there has been in years. Just stay tuned for the official word. Is Penney's not your cup of tea? Then we recommend you try the Elite Opportunity newsletter, which does a lot more trading than we do here in the free end-of-day newsletter. Just to put things in perspective, the SCN EO added three trades to its open portfolio this week, bringing its total number of positions up to eleven. We only "almost" added one trade to our portfolio here in the end-of-day newsletter, which would have brought our total open positions count to... one. Don't get me wrong. I'm looking for new ideas for you all the time, and we share them as I get them if they look good enough to buy. We've done pretty well with the picks we've managed to dole out to you too. I think our average gain this year has been 4.4% per trade (which, believe it or not, is actually a very good average), with a cumulative gain of 58% with all thirteen trades this year. You know who's doing better in terms of quality and quantity? The Elite Opportunity's cumulative gain of all of its trades this year is an amazing 250%, with an average trade result of a 5.3% gain. Not to belittle this end-of-day newsletter's success, but numbers don't lie, you know? John Monroe and his team are giving a full-time effort to picking stocks, and as much as we'd like to do the same here in the free newsletter and at the site, we just don't have the resources to keep up with the Elite Opportunity's pace and results. If you want the really good stuff, the EO is the way to go. Here's how to get a free trial, or cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ We're Now at a Fork in the Road As for the market, today was "it". Tomorrow we'll either break out or break down. There's not a lot of opportunity for anything in between at this point. How so? The S&P 500 hit a high of 1955.23 and closed at 1955.18. That's squarely in between the 20-day and 50-day moving average lines, and right in line with the floor from last month. The VIX also closed right at its 50-day moving average line without moving under it. Based on the current trend, the momentum still looks bullish. Heck, with another gain under our belts, the momentum looks even more bullish than it did yesterday. Problem: There's still a suspicious lack of participation in this rally effort. Today was the second-lowest volume day in months; it barely even registered on our chart. Unless more people step up to the plate and start filing in, this rally is running on fumes regardless of how great the momentum looks. Who knows? Maybe a move above all the resistance around 1955 will be the clue buyers need to start diving in again en masse. I know this much for sure though... I'm not willing to take a blind swing when we'll have our answer within a couple of days. Let's keep our powder dry for now, but be ready to roll. The time's comin'. Hey, by the way, the World Gold Council published its second-quarter supply/demand report today. This is actually a big deal, as it provides the details of how gold demand is changing over time. More plainly, it's a true picture of gold's "fundamentals" so many people talk about but rarely ever have in-hand (even though they act as if they do). For an example of the kinds of important details this report provides you, here's the last time we dissected the WGC's quarterly report. In any case, we didn't have time to analyze and summarize the key gold trends for you in today's newsletter, but we plan on digging through the data and updating our supply/demand charts in tomorrow's newsletter. We're also going to be taking a technical look at gold, for short-term purposes. There's actually a glimmer of hope on this front, somewhat for those who love the commodity, but even more so for those who love gold miners. You'll see what we're talking about on Friday. You'll definitely want to check it out.